Vermont nonprofits and businesses jointly spoke out Tuesday against a new cap on itemized tax deductions, which state lawmakers have proposed to help close a budget gap.

Gathering at the Lake Champlain Regional Chamber of Commerce headquarters in Burlington, representatives from each group urged lawmakers in the state's Senate to consider other options for raising $35 million to help close the budget gap.

The Vermont House passed the revenue bill in late March. The Senate had its first reading of the bill on April 1, and the bill was referred to the Senate's finance committee.

Nonprofits say the tax changes could hurt charitable contributions in the state, which the agencies have heavily relied upon in recent years.

Business leaders say the proposed payroll tax of 0.3 percent will "have a devastating effect" on Vermont's businesses and the private sector. Among the proposals by both the House and Senate, LCRCC president Tom Torti said the proposed tax deductions cap will "be ruinous," affecting young people trying to buy homes, those enrolled in health care who have a variety of medical expenses, and nonprofits.

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Vermont nonprofits and businesses jointly spoke out Tuesday against a new cap on itemized tax deductions, which state lawmakers have proposed to help close a budget gap.

"We're convinced that the scramble to fill the leaking bucket that we have and the lack of rigor in assessing cause and effect will leave us in a terrible place socially and economically," Torti said.

Common Good Vermont executive director Lauren-Glenn Davitian said lawmakers are "eroding" a social contract the state made with nonprofits a few decades ago. Davitian's organization provides training and services to other nonprofit groups.

"The state has, for many years, either level-funded or declined in the funding that they give through state contracts and grants," Davitian said.

The plan that passed the House would cap itemized deductions at 2.5 times the standard deduction, Davitian said. This means that when filing state income taxes, a taxpayer could declare deductions of up to $15,500 for an individual or $31,000 for a married couple filing jointly. That total includes deductions such as mortgage interest and property taxes, work-related expenses, health care deductions, and others in addition to charitable contributions.

All the deductions must fit under that cap, she said.

"The only area they really have discretion is in charitable giving," Davitian said. She added that the cap is a disincentive for people who give to charities or nonprofits. United Way of Chittenden County executive director Martha Maksym added that nonprofits depend heavily on philanthropy to continue providing services.

Rep. Janet Ancel, D-Calais, chairwoman of the House Ways and Means Committee said in late March that she is sympathetic to the nonprofits' arguments, and that her committee tried to strike a balance between the state's need to raise revenues and the nonprofits' fears, the Associated Press reported. However, she added, the federal tax deduction is where the real money is, providing two to three times the benefit to the taxpayer that the state one does.

Contact Elizabeth Murray at 651-4835 or emurray@freepressmedia.com. Follow her on Twitter at www.twitter.com/LizMurraySMC.